Oil is not a national security issue: "... America steadfastly clings to perceptions formed in the 1970s, and national policies continue to reflect oil paranoia." (National Affairs).

• Author: Losman, Donald
• Position: Protecting oil interests abroad

ECONOMIC SECURITY ISSUES have traditionally centered on health uncertainties, retirement needs, and protection against income interruption. However, over the past quarter-century, the U.S.'s civilian leadership and the military community, joined by a variety of domestic groups, have transformed the concept of economic security into a prominent national security issue. Undoubtedly, the major impetus for this was the 1973 OPEC oil embargo and the,economic trauma of the 1970s. In those dark days of oil shortages, record interest rates, and rapacious inflation, foreign economic "weapons" appeared to threaten the economic well-being of the U.S. and possibly even jeopardize important strategic interests. In debates on national security, economic concepts and references began to abound. Reflecting this blending of economics and national security, public opinion pollsters began to ask Americans what their perceptions were of the gravest national security threats, usually posing economic challenges (such as those from Japan) as one choice and military threats (from the Soviet Union or North Korea, for example) as another.

Nevertheless, even as late as 1987 and 1988, formal documents on national security strategy remained narrowly focused on military power and the U.S. rivalry with the Soviet Union. The documents began to broaden, though, particularly in the administrations of George H. Bush and Bill Clinton, which emphasized the role of economics and entertained the inclusion' of environmental policy. For instance, the first page of the introduction to A National Security Strategy for a New Century, published in December, 1999, has the word "economy" or "economic" five times, and "prosperity" appears twice. Listed under vital national interests is the "economic well-being of our society." The paragraph concludes, "We will do what we must to defend these interests ... using our military might unilaterally and decisively," if necessary.

Those statements indicate that America is willing to use military force to attain economic goals. Contrast that text with the 1988 report's introduction, in which the word "prosperity" never appears, and "economic" is used just three times, mainly as a tool to achieve larger ends, rather than as an end in itself.

Rarely, however, has the economic content of national security policy been put to a rigorous intellectual or logical test. Instead, it has simply been accepted. Yet, the economic security concept as a national security goal is ill-suited, imprecise, and unnecessarily costly, and could entail using U.S. military might in dubious ventures. Moreover, attaining economic objectives through the use (or threatened use) of military force is essentially a "might makes right" philosophy. At best, it is morally questionable; at worst, abhorrent. Operationally, the concept causes problems that complicate and degrade appropriate national security missions.

Human beings tend to be averse to risk, and economic insecurity has traditionally been addressed by economic measures. It has also been addressed, rightly or wrongly, in government programs such as Social Security, Medicare, unemployment compensation, welfare, and trade protection. In short, the U.S. has used private or public economic measures, not the military, as the main provider of economic security.

Oil paranoia

A specter is haunting America--the continuing and, at times, almost hysterical fear of oil shocks. In October, 1973, the Arab oil-producing states imposed production restraints and an embargo--their second such attempt. They did so allegedly as a punishment for those countries that supported Israel in the Middle East war earlier that month. Their first effort at embargo occurred in 1967, following the lightning Israeli victory in the June Six-Day War. That episode is not well-known because it was a total failure. However, global oil market conditions would change substantially in subsequent years.

Oil in the U.S. had been governed by a maze of state and Federal regulations. As a subsidy to domestic oil producers, nominal American prices were held relatively stable--and higher than world prices--from the 1950s through 1973. It was not until 1974, after the second OPEC embargo, that inflation-adjusted (real) U.S. prices were kept below world levels. Nonetheless, even before 1974, domestic price signals were misleading and promoted vulnerability to price and supply disruptions. For example, between 1970 and 1971, inflation-adjusted domestic crude oil prices declined 1.2%, despite real world prices rising more than 21.2%. From 1971 to 1972, real U.S. prices again declined (3.4%) in the face of another increase (7.9%) on world markets, thereby giving American consumers and businesses the illusion of greater availability of oil when just the opposite was occurring.

Internationally, excess producing capacity outside the OPEC countries had virtually disappeared by 1970, just as production had peaked in the U.S. and Canada. Libya's successful negotiations in 1970 with major oil companies marked the beginning of a significant shift in power between the international oil companies and the Middle East oil-producing states, with the latter enhancing their bargaining positions substantially.

Accordingly, economic development around the world, coupled with U.S. government-manipulated domestic oil pricing, brought a serious vulnerability to energy-importing nations in general and to America in particular. The U.S. built a society that resided far from work, drove gas-guzzling automobiles, and lived in energy-inefficient homes. The oil shock of 1973 was extremely disruptive and raised energy and related prices in an American economy that had already been steadily inflating since the mid 1960s. In August, 1971, more than two years before the oil shock, Pres. Richard M. Nixon had invoked price controls to contain inflation. Although the Netherlands and the U.S. were the two targets of the embargo, the entire world was hit with sharply higher oil costs as a result of the 1973 oil crisis.

The link between imprudent American economic policies and the subsequent political and economic crisis cannot be overstated. Indeed, an "energy crisis" was developing long before the October, 1973, war. In 1971, in Teheran, the OPEC producers negotiated a five-year agreement with the oil companies for higher prices, but, in the face of swollen demand, it was almost immediately abrogated.

Although numerous reasons for the tight market for oil existed, the most important, by far, was the rapidly growing U.S. demand. By 1972, U.S. consumption was already pushing the world demand beyond planned...